Title
Government Service Insurance System vs. City Treasurer of the City of Manila
Case
G.R. No. 186242
Decision Date
Dec 23, 2009
GSIS exempt from real property taxes under RA 8291; Katigbak property leased to MHC subject to taxes under beneficial use doctrine; levy prohibited.
government service insurance system
city treasurer
city of manila
A

Case Summary (G.R. No. 186242)

Petitioner’s Claim and Relief Sought

GSIS challenged assessments of real property taxes for years 1992–2002: PhP 54,826,599.37 (Katigbak) and PhP 48,498,917.01 (Concepcion-Arroceros). GSIS asserted exemption from all taxes under its charter (PD 1146, later RA 8291) and prayed for nullification of the assessments and permanent injunctive relief against enforcement including levy or sale.

Procedural History

City Treasurer issued notices (September–October 2002) and scheduled public auction of delinquent properties. GSIS filed certiorari and prohibition in Manila RTC (October 2002), later amended its petition to note Katigbak was leased to MHC (since November 1991) and Concepcion-Arroceros was partly occupied by GSIS and partly by the MeTC. RTC, Branch 49, dismissed the petition by decision dated November 15, 2007; reconsideration denied January 7, 2009. GSIS sought review under Rule 45 raising pure questions of law.

Applicable Law and Constitutional Basis

Primary statutory authorities and provisions applied in the decision: PD 1146 (Revised GSIS Act of 1977, Sec. 33); Republic Act (RA) No. 7160, Local Government Code of 1991 (Secs. 133(o), 193, 234); RA No. 8291 (GSIS Act of 1997, Sec. 39). The Supreme Court’s decision in this matter is to be understood with reference to the 1987 Philippine Constitution (applicable because the decision date is after 1990).

Issues Presented

  1. Whether GSIS is exempt from real property taxation under its charter.
  2. If GSIS is exempt, whether it remains liable for real property taxes on property it leased to a taxable entity.
  3. Whether GSIS properties are exempt from levy and sale for non-payment of real property taxes.

RTC Ruling

The RTC dismissed GSIS’s petition and declared the City of Manila’s assessments valid.

Supreme Court’s Legal Framework and Precedents

  • PD 1146 (Sec. 33) expressly exempted GSIS, its assets and revenues from “all taxes, assessments, fees, charges or duties of all kinds” and protected benefits from attachment, garnishment, levy or other process.
  • RA 7160 (LGC, 1991) contains general withdrawal of previously granted tax exemptions (Sec. 193) and expressly withdraws exemptions from payment of real property tax previously granted, subject to specific exceptions (Sec. 234). The LGC also limits local taxing power over the national government, its agencies and instrumentalities (Sec. 133(o)).
  • RA 8291 (1997) reenacted and expanded the GSIS exemption (Sec. 39), restoring the broad exemption language and expressly stating “any assessment against the GSIS as of the approval of this Act are hereby considered paid.” RA 8291 further provides that the exemptions continue unless expressly and specifically revoked, and that conflicting laws, ordinances, regulations, issuances, opinions or jurisprudence are deemed repealed or ineffective insofar as contrary to Sec. 39.
  • Relevant precedents cited: Mactan-Cebu International Airport Authority v. Marcos (application of LGC withdrawal of exemptions); City of Davao v. RTC (GSIS found liable for real property taxes for 1992–1994 under the LGC but observed RA 8291 later restored exemption); Manila International Airport Authority v. Court of Appeals (MIAA characterized as an instrumentality outside local taxation and reasoning applied analogously to GSIS); cases establishing that unpaid tax attaches to the property and is chargeable against the taxable person in actual or beneficial use (Testate Estate of Concordia T. Lim; Manila Electric Company v. Barlis; Republic v. City of Kidapawan).

First Core Issue — GSIS’s Charter Exemption from Real Property Tax

The Court found GSIS entitled to full tax exemption under its charter. Chronology and legal effect:

  • Under PD 1146 (1977) GSIS enjoyed broad tax-exempt status.
  • RA 7160 (1991) withdrew prior tax exemptions generally; accordingly, GSIS’s exemption was considered withdrawn effective January 1, 1992, making GSIS liable for real property taxes for the interim period after LGC effectivity. This accords with City of Davao where GSIS was held liable for 1992–1994 taxes.
  • RA 8291 (1997) reenacted the exemption (Sec. 39), restoring categorical exemption from “all taxes, assessments, fees, charges or duties of all kinds” and expressly considering any assessment against GSIS as of the approval date of RA 8291 to be paid. The Court emphasized the all-embracing condoning proviso in Sec. 39 which treats assessments existing at RA 8291’s approval as paid.

The Court concluded that GSIS is an instrumentality of the national government and its properties are, in principle, not subject to local real property taxation under the combined effect of GSIS’s charter exemptions and the limitation on local taxing power in Sec. 133(o) of the LGC. Consequently, aside from an interim period following the LGC’s effectivity and before RA 8291, GSIS is not liable for the real property taxes assessed by the City of Manila.

Second Core Issue — Leased Property and the Beneficial Use Doctrine

The Court applied the “beneficial use” principle in Sec. 234(a) of the LGC: real property owned by the Republic or its instrumentalities is exempt from real property tax except where beneficial use has been granted, for consideration or otherwise, to a taxable person. The Court reasoned:

  • GSIS retained non-taxable status generally, but when GSIS granted beneficial use of the Katigbak property to MHC (a taxable person) by lease, the property ceased to be exempt to the extent of the lessee’s beneficial use. GSIS had leased the Katigbak property to MHC since November 1991, and MHC had actual and beneficial possession and use from 1991 onward.
  • Accordingly, the real estate tax assessment covering 1992–2002 on the Katigbak property is valid insofar as liability attaches to the taxable beneficial user. Under established law, unpaid real property tax attaches to the property but is chargeable against the taxable person who had actual or beneficial use and possession, regardless of ownership. Thus MHC — the lessee and beneficial user — is the party liable to pay the accrued realty taxes for that property.
  • Additionally, the KSIS–MHC lease contract expressly obligates MHC to pay any taxes that may be imposed on the leased property (stipulation 18), further confirming MHC’s contractual obligation to pay the assessed taxes.

Because MHC was not impleaded in the action, the Court instructed that the City must serve the assessment on MHC and pursue remedies against MHC for nonpayment, rather than proceed against the real property of GSIS by levy or sale.

Third Core Issue — Exemption from Levy and Sale

The Court held that GSIS properties are exempt from attachment, garnishment, execution, levy or other legal processes by virtue of RA 8291 Sec. 39 which expressly protects GSIS funds and properties from such processes. Even if a tax liability attached during the interim period when LGC had withdrawn exemptions (1992–1996), the Court concluded that any attemp

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